Austerity alone will not rescue Malaysia

Austerity alone will not rescue Malaysia

When it first became clear last summer that no country in
Southeast Asia was immune to the currency turmoil, economists and
politicians in the region had a hard time grasping the true
nature of the problem.

Optimists insisted that the downward trend was merely a
temporary glitch in the onward march of the region's economies. A
handful of pessimists, on the other hand, argued that the crisis
would have to be taken seriously and tough, even painful, steps
would have to be taken.

Six months later, economists and politicians in Malaysia have
clearly grasped the nature of the problem. The administration has
intensified its austerity drive with cuts in civil service and
entertainment allowances for government servants and freezing
privatization plans. We endorse Malaysia's tough new stance. But
we do not believe these measures on their own will solve the
country's economic problems.

The trouble is that many people in Malaysia have no confidence
in the government's policies or in the banking system. There is a
widespread feeling that the Malaysian government has yet to come
clean on the depth of its economic problems.

If the government truly wants to set the country on the path
to recovery it must be more open and tell the people of Malaysia
exactly how deeply the banks are in trouble. Economics is a
question of human livelihood. And it is only human to resent any
move that will jeopardize the economic benefits that many people
in Malaysia believe they have earned.

This means there will be a lot of resistance to the austerity
drive from the public at large. Even those who realize that the
austerity campaign is aimed at easing the country's economic woes
will ask: "Why should we have to foot the bill for a problem
created by private investors and banks?" The government must
answer this question by being more open and truthful about the
true dimensions of the difficulties facing Malaysia.

-- The Hong Kong Standard